About the “Extended Medicaid” bruhaha …

It’s center stage in the current debate.


So, I dug in a bit to understand the issue.



Here are my takeaways ….



Basic” Medicaid

Medicaid – which dates back to the 1980s – was originally intended for impoverished children, pregnant women, disabled and seniors (lacking Medicare coverage).

To qualify, applicants had to prove that they were in the covered categories and impoverished, i.e. household income below the government-defined poverty level.

Individual states administer Medicaid programs that are (slightly) tailored to their citizens specific needs.

“Basic” Medicaid costs are split between the Feds and the states – with the Federal government covering about 57% of the costs.

The Federal portion is funded by the roughly half of Americans who pay income taxes.

About 60 million people (including children) are covered by the originally intended Medicaid programs.

The Federal portion of the Medicaid costs is roughly $225 billion …. just shy of $4,000 per enrollee.


The ObamaCare Expansion

ObamaCare provisioned Medicaid health insurance for “near poor” Americans with incomes above the federal poverty line (currently $16,643 for an individual, $33,948 for a family of four).

Specifically, the income criteria was raised to 138 percent of the federal poverty line (about $21,000 for an individual, $47,000 for a family of four).

But, individual states were empowered to extend (or not extend) their Medicaid programs to the higher income cut-off.

To encourage states to extend the program, ObamaCare offered to pay 100% of the extended Medicaid costs until 2020, at which point the Federal portion would be reduced to 90%.

Roughly, 30 states (mostly blue states) extended their Medicaid programs.

The other states (all red states) didn’t extend their programs, either for ideological reasons (resistance to a new entitlement program) or for fear that the Feds would eventually un-sweeten the cost-sharing arrangement – sticking the states with a larger share of the cost burden (say, up to the 43% that states pay for basic Medicaid).

Currently, there are 12 to 14 million people enrolled in Extended Medicaid.

Enrollments are running much higher than originally projected, but it’s unclear what’s driving the over-run.

According to a July 2016 DHHS report, Medicaid expansion enrollees cost an average of $6,366 in 2015 … higher than Basic Medicaid enrollees.


The GOP’s American Healthcare Plan

First, the proposed GOP leaves practically all of ObamaCare intact.

Most premium subsidies are maintained under a reformulated payment scheme.

The Individual Mandate is eliminated. So people won’t have to pay a tax penalty if they don’t carry health insurance.

The biggest current controversy is the handling of ObamaCare’s Extended Medicaid provisions, even though the GOP proposal leaves the program largely intact.


The Issues

First, undeniably, Extended Medicaid is costly (over $65 billion annually) … with the full amount being paid by Federal income tax-payers.

The cost-sharing scheme creates a natural fiscal tension:

The participating states get a free ride – their citizens get benefits, but the states pay nothing.

Federal tax-payers from all states fund the program – whether or not their state participates.


There’s an ideological split:

Some believe that the Medicaid Extension covers the “near poor” who can’t afford health insurance.

Others believe that the Medicaid Extension is an entitlement program for “able-bodied adults” with the capability to support themselves, but who lack the motivation.


Bottom line:

The high costs are a fact; the ideology is debatable; compromise is unlikely.

The GOP is learning (the hard way) about the Entitlement Effect: once somebody gets something, they don’t want to give it up.

So, even a small adjustment to Extended Medicaid (e.g. shifting more costs to participating states, containing enrollment to current enrollees) will elicit emotional headlines highlighting that “Millions lose their health insurance”.

It’ll be interesting (and frustrating) to watch …


Reference:  Key CBO Data Tables  



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